SOME  PROBLEMS  OF  THE 
PANAMA  CANAL 


ADDRESS  OF 

HENRY  L.  STIMSON 

SECRETARY  OF  WAR 

BEFORE  THE  COACVIERCLiL  CLUB  AT 

KANSAS   CITY;    TUESDAY   EVENING, 

NOVEMBER  14,  1911 


Gift  of  the  Panama  Canal  Museum 


4/ 


WASHINGTON 
18U 


SOME  PROBLEMS  OF  THE 
PANAMA  CANAL 


ADDRESS  OF 

HENRY  L.  STIMSON 

SECRETARY  OF  WAR 

BEFORE  THE  CO^IMERCIAL  CLUB  Al^ 

KANSAS    CITY,    TUESDAY    EVENING, 

NOVEMBER  14,  1911 


4> 


WASHINGTON 
1911 


SOME  PROBLEMS  OF  THE  PANAMA  CANAL. 


I  am  very  glad  to  have  this  opportunity  to  meet  the  representative 
business  men  of  Kansas  City.  I  have  ah'eady  had  occasion  to  marlc 
the  public  spirit  of  your  community  and  the  vigor  with  which  you  can 
take  up  an  industrial  problem.  More  than  five  years  ago,  when  I  was 
first  appointed  Federal  attorney  in  New  York  City,  you  were  engaged 
in  3'our  long  fight  for  fair  railroad  rates  to  the  Missouri  Kiver  and  to 
put  an  end  to  the  rebates  and  discriminations  which  had  previously 
existed.  One  of  my  first  official  duties  was  to  engage  in  a  similar 
struggle  to  free  from  corresponding  abuses  the  trunk  lines  of  railroads 
leading  out  of  New  York  City  toward  the  West.  I  remember  very 
clearly  the  encouragement  which  I  received  in  my  efforts  from  the 
success  which  you  had  already  attained  in  yours. 

Kecently,  since  I  have  been  appointed  to  the  head  of  the  depart- 
ment which  has  in  charge  the  building  of  the  Panama  Canal,  I  have 
noted  with  great  satisfaction  the  intelligent  interest  which  your  city 
is  taking  in  this  enterprise  and  the  farsighted  efforts  which  your 
citizens  have  been  making  for  the  purpose  of  developing  navigation 
on  the  Missouri  River  and  thereby  placing  Kansas  City  in  a  position 
where  it  will  be  sure  to  share  in  the  great  expansion  of  Gulf  trade 
which  must  come  with  the  opening  of  the  canal. 

What  I  wish  to  say  to  you  to-night  concerns  some  of  the  present 
problems  which  arise  out  of  the  construction  of  that  canal.  We  are 
a  little  in  danger  of  finding  ourselves  in  a  singular  position.  We  are 
engaged  in  completing  the  greatest  engineering  work  of  the  ages. 
Our  national  pride  is  keenly  centered  around  it.  We  love  to  dwell 
on  the  spectacular  triumphs  which  have  already  been  achieved — our 
conquests  over  the  dreaded  diseases  of  the  Tropics  and  the  splendid 
harmony  with  which  American  energy  and  American  inventive  skill 
are  uniting  in  removing  mountains,  changing  the  courses  of  rivers, 
and  creating  a  huge  waterway.  We  dwell  on  the  immense  vista  of 
economic  changes  in  the  world's  trade  which  will  be  created  by  the 
opening  of  this  new  transisthmian  route. 

And  yet  at  the  same  time  we  are  in  danger  through  our  own  neglect 
of  finding  ourselves  with  the  canal  all  ready  on  our  hands  and  no  pro- 
vision made  for  its  operation.  Part  of  this  is  due  to  the  fact  that  our 
Army  engineers,  always  efficient  and  never  loquacious  or  self-advertis- 
ing, are  rushing  through  this  great  work  in  far  less  than  the  schedule 

17500— U  (3) 


time.  When  the  next  rainy  season  commences  with  May  the  water 
will  begin  to  rise  in  the  great  ditch  until  at  the  close  of  that  season 
it  is  expected  that  it  will  reach  at  least  the  45-foot  level.  That 
would  mean  water  enough  to  float  small  boats  throughout  its  length. 
And  unless  unforeseen  catastrophes  occur  the  canal  will  be  fully 
ready  for  ocean  traffic  more  than  a  year  before  the  time  set  for  its 
formal  opening. 

The  engineers  and  the  workmen  will  have  done  their  part;  let  us 
see  what  remains  for  you  and  me. 

In  the  first  place,  we  must  create  a  permanent  organization  to 
operate  the  canal  and  must  train  the  force  of  men  necessary  for  this 
operation.  By  the  act  of  Congress  of  June  28,  1902,  known  as  the 
Spooner  Act,  the  President  of  the  United  States  was  directed  to 
cause  the  canal  to  be  excavated,  constructed,  and  completed,  and  was 
authorized  for  that  purpose  to  employ  such  persons  as  he  deemed 
necessary  and  fix  their  compensation.  As  soon  as  the  canal  is  com- 
pleted, his  authority  and  that  of  every  one  of  his  subordinates  will 
cease.  Even  now  as  the  work  is  nearing  completion  the  time  is  at 
hand  when  the  skillful  force  of  trained  men  who  have  been  engaged 
in  its  construction  must  be  gradually  disbanded  and  sent  back  to  the 
States.  This  work  of  disintegration  must  commence  within  a  few 
months;  and  unless  Congress  gives  authority  to  gradually  blend  the 
constructing  force,  or  so  much  of  it  as  is  needed,  into  a  trained  force 
for  permanent  operation,  we  shall  be  reduced  to  the  expensive  and 
somewhat  ridiculous  proceeding  of  shipping  our  5,000  skilled  Amer- 
ican operatives  back  to  the  States,  only  to  begin  immediately 
afterwards  the  painful  process  of  collecting  and  breaking  in  a  new 
operating  force.  Only  those  of  you  who  have  visited  the  Isthmus 
and  who  have  seen  the  splendid  characteristics  of  the  men  now  there, 
their  trained  skill  and  their  superb  loyalty  to  and  enthusiasm  in  their 
work,  can  appreciate  what  an  economic  loss  would  be  involved  in 
such  a  performance. 

There  then  comes  up  the  question  of  what  kind  of  legal  organi- 
zation or  government  we  are  to  create  in  order  to  train  this  force 
and  thereafter  for  all  time  operate  the  canal  and  exercise  our  control 
over  the  surrounding  zone.  In  deciding  this  question  much  depends 
on  keeping  the  fundamental  facts  clearly  before  us  and  not  being 
led  away  by  loose  generalization  or  false  analogies.  The  problem 
differs  wholly  from  that  which  confronts  us,  for  instance,  in  Porto 
Rico  or  any  of  our  other  insular  possessions.  The  Canal  Zone  con- 
tains no  place  for  an  independent,  permanent  population.  I  went 
over  it  pretty  thoroughly  myself  last  summer,  tramping  through 
large  portions  of  its  jungles  on  foot  with  Col.  Goethals.  From  an 
agricultural  standpoint  it  is  the  least  attractive  part  of  almost  the 
entire  Republic  of  Panama.    It  is  a  strip  only  10  miles  wide  and  40 


miles  long.  About  a  quarter  of  that  strip  will  eventually  be  filled 
by  the  Gatun  Lake.  The  rest  of  it  is  either  tropical  swamp  and  jungle 
or  low,  rocky  hills.  There  are  none  of  the  fine  grasslands  which 
can  be  found  in  other  portions  of  the  Republic.  It  is  preposterous 
to  think  of  it  ever  forming  a  basis  for  an  American  farming  settle- 
ment. Its  only  present  population,  outside  of  the  construction  force, 
consists  of  a  few  negro  squatters,  formerly  workmen  on  the  canal, 
who  have  jumped  their  job  and  prefer  to  live  on  poorly  cultivated 
banana  trees. 

This  characteristic  of  the  zone,  this  utter  absence  of  all  possibility 
for  a  future  independent  population,  is  most  fortunate.  It  gives  us  a 
chance  to  frame  an  organization  adapted  directly  to  our  main  purpose 
and  uncomplicated  with  other  problems  of  government.  The  prob- 
lem reduces  itself  to  the  management  of  a  great  public  work,  and 
not  the  government  of  a  local  republic.  The  question  is  that  of  open- 
ing and  shutting  the  lock  gates  and  of  protecting  them  in  time  of 
trouble;  it  is  not  a  question  of  educating  or  of  uplifting  a  dependent 
people.  The  men  who  are  to  do  this  work  are  not  to  be  the  representa- 
tives of  a  local  democracy  on  the  Canal  Zone,  but  rather  the  trusted 
agents  of  the  90,000,000  of  American  people  whose  national  welfare  is 
tied  up  in  the  canal  and  its  safety.  It  is  essentially  an  executive 
problem,  and  there  is  no  more  reason  for  introducing  all  the  complex 
checks  and  balances  of  government  which  we  rightly  regard  as  essen- 
tial to  a  self-governing  community  than  there  would  be  to  permit  the 
men  of  the  Regular  regiments  which  we  are  sending  there  to  protect 
the  canal  to  provide  for  their  own  discipline  or  choose  their  own  com- 
manders. Of  course  we  shall  have  to  have  local  courts  in  the  zone  for 
the  purpose  of  administering  local  justice  and  safeguarding  individual 
rights,  and  there  may  be  some  other  minor  civil  functions  to  be  at- 
tended to ;  but  the  main  function  of  Canal  Zone  government  will  be 
canal  administration,  and  nothing  else. 

"We  can  not  get  away  from  the  fact  that  at  bottom  the  canal  pre- 
sents a  military  problem.  For  defensive  purposes  the  Panama  Canal 
practically  doubles  the  capacity  of  our  fleet.  It  is  a  measure  of  de- 
fense of  most  terrific  effectiveness.  The  three  hundred  and  seventy- 
five  millions  which  we  are  spending  on  it  not  only  develop  enormous 
possibilities  of  peaceful  trade,  but  at  the  same  time  is  virtually  equiva- 
lent for  defensive  purposes  to  the  expenditure  of  a  nearly  equal 
amount  in  navy.  To  have  it  blockaded  at  a  critical  moment  in  our 
national  life  either  by  accident  or  design,  by  inefficiency  or  malice, 
might  be  quite  as  disastrous  as  having  20  of  our  battleships  sunk  at 
sea.  The  temptation  which  that  mere  fact  imposes  upon  any  nation 
with  whom  the  United  States  may  be  at  war  must  never  be  forgotten 
or  lost  sight  of.  Correspondingly,  its  military  effectiveness  will 
make  it  a  powerful  ally  in  assuring  a  maintenance  of  peace. 


Nor  must  we  for  a  moment  forget  the  sanitary  problem.  For 
400  years  this  strip  of  land  was  notorious  as  the  plague. spot  of  the 
Americas.  It  has  been  redeemed  and  kept  free  from  disease  during 
our  work  of  construction  only  by  the  most  unceasing  vigilance  and 
the  constant  use  of  the  Executive  power.  The  necessity  for  this 
vigilance  will  continue.  In  some  respects  it  will  be  even  greater 
after  the  canal  is  opened,  when  swift  vessels  passing  through  it 
become  possible  media  for  transmitting  to  all  portions  of  the  world 
the  contagion  of  the  dreaded  yellow  fever.  Only  a  continual  vigilant 
use  of  the  administrative  power  can  insure  us  against  such  possible 
contagion. 

In  short,  it  seems  to  me  that  we  can  safely  guide  our  course  in  the 
future  by  our  experience  in  Panama  in  the  past.  The  landmarks 
of  each  problem  are  the  same.  To  successfully  operate  and  safeguard 
the  canal  is  as  purely  an  administrative  undertaking  as  to  success- 
fully construct  it,  although  the  mechanics  of  the  two  tasks  are,  of 
course,  entirely  different.  The  canal  is  being  constructed  under  the 
flexible  system  of  Executive  administration.  The  President  was  di- 
rected by  Congress  to  build  it,  and  he  is  building  it.  As  each  com- 
plicated problem  of  construction  or  administration  has  come  up  the 
system  which  Congress  thus  wisely  adopted  has  been  fpund  suflS- 
ciently  flexible  to  allow  it  to  be  developed  and  changed  to  meet  each 
contingency. 

That  same  policy  should  be  continued  as  to  the  operation.  The 
President  should  be  authorized  and  directed  to  operate  the  canal 
through  such  forms  of  administrative  government  as  he  may  devise. 
This  is  a  policy  appropriate  to  meet  the  military  and  naval  problems 
which  underlie  the  situation,  because  the  President  is  the  constitu- 
tional Commander  in  Chief  of  the  Army  and  Navy.  It  furnishes  the 
most  efficient  method  of  government,  and  we  need  efficiency  in  dealing 
with  a  subject  matter  so  vitally  important  at  all  times  to  our  Nation 
as  the  smooth  working  of  this  canal.  Thirdly,  it  is  a  method  flexible 
enough  to  meet  the  new  and  uncertain  problems  which  are  bound  to 
arise.  » 

I  am  glad  to  say  that  these  features  have  been  recognized  in  the 
bill  reported  to  the  last  Congress  by  the  Committee  on  Interstate 
and  Foreign  Commerce,  which  bill,  in  substantially  the  same  form, 
has  been  introduced  into  the  present  Congress.  I  sincerely  hope  that 
these  features  will  be  preserved  in  the  legislation  which  is  eventually 
adopted,  and  tliat  such  legislation  will  be  adopted  soon. 

The  second  problem  which  lies  before  us  is  to  provide  the  ma- 
chinery which  will  determine  and  fix  the  proper  tolls  to  be  charged  to 
the  vessels  using  the  canal.  The  solution  of  this  commercial  problem 
is  even  more  pressing  than  that  of  organizing  the  canal  government. 
The  canal  is  built  to  secure  trade.     The  great  benefits  which  we 


anticipate  from  it  will  only  come  from  its  adoption  as  a  route  of 
trade.     But  modern  trade  does  not  change  its  routes  instantaneously. 

The  Panama  Canal  will  have  at  least  three  great  competitors — the 
Suez  Canal,  the  Tehuantepec  route  of  Mexico,  and  our  own  trans- 
continental railroads.  The  amount  of  commerce  which  will  use  it 
will  depend  to  a  large  extent  upon  the  comparative  cost  of  trans- 
portation over  these  different  routes.  It  is  said  that  a  dollar  per  ton 
of  freight  per  thousand  miles  represents  the  coal  consumption  of  the 
slow-going  freight  steamer.  In  other  words,  every  dollar  per  ton 
which  we  charge  as  tolls  for  the  canal  will  neutralize  a  thousand  miles 
of  the  advantage  in  distance  which  the  Panama  route  may  have  over 
any  competitor.  Under  these  conditions  the  amount  of  commerce 
which  will  use  it  is  largely  a  question  of  tolls.  And  in  order  to  make 
their  plans,  to  build  their  steamers,  to  make  their  contracts,  and 
assume  all  the  other  long-time  obligations  which  enter  into  modern 
trade,  shipowners  must  know  about  two  years  beforehand  wiiat  the 
rate  of  toll  through  the  canal  will  be.  For  many  months  already  we 
have  been  receiving  letters  from  agents  of  ocean  transportation  lines 
pressing  upon  us  the  solution  of  this  question,  and  I  know  at  least 
one  line  which  has  been  obliged  to  take  the  risk  of  laying  down  the 
keels  of  five  great  steamers  for  use  in  this  traffic  without  knowing  as 
yet  the  conditions  upon  which  the  use  of  these  steamships  will  depend. 

The  power  which  fixes  the  canal  tolls  must  be  sufficiently  flexible 
to  readjust  itself  to  meet  changing  conditions  of  time  and  com- 
petition; it  must  be  susceptible  of  continuous  watchfulness  pre- 
paratory for  ready  action ;  and  it  must  have  the  capacity  to  deal  with 
technical  commercial  facts.  These  are  the  characteristics  of  an  ad- 
ministrative officer  or  board.  The  legislation  which  provides  for  the 
canal  tolls  should  indicate  the  broad  lines  of  national  policy  within 
which  the  tolls  are  to  be  fixed.  But  it  should  provide  power  for  the 
establishment  of  an  administrative  officer  or  board  who  will  be  always 
in  session,  always  studying  the  problem  and  acquiring  information 
thereon,  always  watchful  against  new  or  shifting  conditions,  and 
who  shall  have  power,  within  these  broad  lines  of  policy,  to  fix  or 
change  the  tolls  so  as  most  effectively  to  insure  that  this  neAv  trade 
route  shall  fulfill  the  great  national  and  international  functions  for 
which  it  is  intended. 

Closely  involved  in  this  question  of  fixing  the  tolls  is  the  question 
whether  the  United  States  has  the  right  to  pay  the  tolls  on  American 
vessels  using  the  canal.  There  has  been  criticism  against  even  the 
suggestion  of  this  possibility.  There  was  similar  criticism  a  few 
years  ago  against  the  proposition  to  fortify  the  canal,  until  the  pub- 
lication of  Secretary  Hay's  correspondence  with  Lord  Lansdowne 
revealed  the  frankness  of  our  negotiations  on  that  subject  with  Great 
Britain  and  showed  how  clearlj'  Great  Britain  had  recognized  our 


right  to  fortify  the  canal.  The  United  States  will  deal  with  its  sister 
nations  in  perfect  frankness  and  in  absolute  fulfillment  of  its  treaty 
pledges.  There  will  be  no  violation  of  our  treaties ;  neither  will  there 
be  any  evasion  of  them.  T^Tien  the  facts  as  to  this  question  are  exam- 
ined, they  are  in  my  opinion  so  clear  as  to  leave  no  doubt  or  question 
as  to  the  right  of  the  United  States,  both  legal  and  moral,  in  this 
respect.  The  clause  of  the  Hay-Pauncefote  treaty  which  governs 
the  question  is  a  declaration  by  the  United  States  which  expressly 
adopts  the  rules  governing  the  Suez  Canal.     It  provides : 

The  United  States  adopts,  as  the  basis  of  the  neutralization  of  such  ship  canal, 
the  following  rules,  substantially  as  embodied  in  the  Convention  of  Constanti- 
nople, signed  the  28th  October,  1888,  for  the  free  navigation  of  the  Suez  Canal ; 
that  is  to  say : 

1.  The  canal  shall  be  free  and  oi)en  to  the  vessels  of  commerce  and  of  war  of 
all  nations  observing  these  rules,  on  terms  of  entire  equality,  so  that  there  shall 
be  no  discrimination  against  any  such  nation,  or  its  citizens  or  subjects,  in 
respect  of  the  conditions  or  charges  of  traffic,  or  otherwise.  Such  conditions  and 
charges  of  traffic  shall  be  just  and  equitable. 

Now,  in  the  case  of  the  Suez  Canal,  it  has  never  been  considered  a 
violation  of  this  rule  of  neutralization  for  a  nation  to  pay  the  tolls 
upon  the  vessels  flying  its  flag.  This  is  done  directly  by  the  Govern- 
ments of  Russia  and  Austria-Hungary,  which  have  made  appropria- 
tions for  the  express  purpose  of  paying  the  tolls  of  vessels  of  their 
merchant  marine.  Furthermore,  substantially  every  other  European 
Government  approj^riates  from  its  treasury  and  pays  to  vessels  using 
the  Suez  Canal,  in  the  form  of  subsidies,  sums  of  money  fully  or 
partly  equivalent  to  the  tolls  of  the  canal.  In  the  case  of  Germany, 
France,  Japan,  Italy,  and  Spain,  the  amount  thus  appropriated  is 
regularly  more  than  sufficient  to  pay  the  tolls.  In  the  case  of  Great 
Britain  the  subsidies  paid  to  the  Peninsula  &  Oriental  Co. — the  prin- 
cipal line  which  uses  the  canal — amount  to  nearly  six-sevenths  of  the 
tolls.  These  subsidies  were  not  all  limited  to  mail  steamers ;  many  oi 
them  were  paid  likewise  on  freight  steamers. 

It  is  perfectly  clear,  therefore,  that  when  the  Panama  Canal  is 
opened,  the  English  vessels  which  use  it,  the  German  vessels  which 
use  it,  the  vessels  of  practically  all  of  our  competitors  which  use  it, 
will  be  in  receipt  from  their  respective  Governments  of  sums  of 
money,  either  given  them  directly  for  the  purpose  of  paying  their 
tolls  or  perfectly  applicable  in  their  discretion  to  such  use.  It  will  be 
impossible  for  the  United  States  to  prevent  this ;  for  under  the  Suez 
rules  which  we  have  thus  adopted  for  Panama,  such  payment  does 
not  amount  to  a  discrimination  or  a  violation  of  the  terms  of  entire 
equality  for  which  those  rules  provide.  Is,  then,  the  United  States, 
which  built  the  canal,  to  be  the  one  nation  whose  vessels  can  not 
have  such  assistance?  Will  any  rule  of  construction  of  the  Hay- 
Pauncefote  treaty  or  any  rule  of  honor  prevent  the  United  States 


9 

from  adopting  a  similar  course?  Will  anyone  contend  that  the 
almost  universal  system  of  governmental  assistance  to  a  merchant 
marine  has  been  limited,  in  our  case,  by  the  Hay-Pauncefote  treaty — 
limited,  not  by  plain  and  express  covenant,  but  by  indirection  and 
implication?  Would  Great  Britain  dream  of  making  such  a  con- 
tention against  the  United  States  when  she  herself  is  paying  annual 
subsidies  to  her  merchant  marine  of  between  six  and  seven  million 
dollars  a  year?  Has  the  United  States,  in  her  covenant  to  "  insure 
the  neutrality  of  the  canal  on  terms  of  entire  equality  "  so  shackled 
her  own  powers  that  she  can  not  resort  to  the  universally  established 
methods  which  her  competitors  will  use  in  respect  to  their  vessels 
passing  through  the  canal  ?  Does  equality  to  all  other  nations  mean 
inequality  to  the  United  States?     The  answer  is  self-evident. 

The  clause  was  never  intended  to  forbid  a  nation  to  assist  her  own 
marine  with  her  own  funds.  By  it  the  United  States  barred  herself 
from  using  her  power  over  the  canal  to  injure  the  trade  of  another. 
She  could  not  isolate  or  discriminate  in  any  way  against  another  in 
that  other's  use  of  the  canal.  But  it  was  never  dreamed  that  she 
could  not  use  the  resources  of  her  own  treasur}?^  in  favor  of  her  own 
vessels. 

I  think,  therefore,  that  the  United  States  has  a  clear  right  to 
appropriate  to  the  vessels,  paying  the  same  the  sums  paid  into  its 
treasury  by  those  vessels  in  the  form  of  canal  tolls.  This  being  so, 
there  is  no  difference,  save  in  form,  whether  she  makes  this  appro- 
priation out  of  her  treasury  to  such  vessels  by  receiving  the  money 
from  them  first  and  repaying  it  to  them,  or  by  simply  relieving  them 
from  the  payment  of  those  tolls.  In  either  case  the  money  in  ques- 
tion belongs  to  the  United  States.  In  either  case  it  amounts  to  a 
gift  by  the  United  States  of  her  own  funds  to  the  vessels  in  question. 

The  existence  of  the  right  is  clear ;  the  need  or  wisdom  of  its  asser- 
tion presents  a  broad  question  of  policy.  The  exercise  of  this  power 
must  depend  upon  the  conclusion,  based  upon  full  understanding  of 
the  facts,  that  the  National  interests  will  be  furthered  by  securing 
this  advantage  to  American  vessels  engaged  in  trans-Isthmian  trade. 

This  question  of  tolls  has  thus  far  been  discussed  mainly  in  respect 
to  our  coastwise  traffic.  This  coastwise  trade  presents  a  special 
problem.  In  one  respect  it  has  less  need  of  a  canal  subsidy  than  our 
foreign  trade  because  it  already  has  a  Government  monopoly,  "\^^lile 
our  vessels  engaged  in  foreign  trade  have  been  virtually  driven  off  the 
ocean  by  foreign  competition  our  coasting  trade  still  exists  because  no 
other  than  American  vessels  are  permitted  by  law  to  engage  in  it. 

But,  on  the  other  hand,  our  coastwise  traffic  is  subject  to  the  compe- 
tition of  our  transcontinental  railroads,  and  this  is  really  the  con- 
trolling feature  of  the  problem.  One  of  the  main  benefits  which  the 
United  States  expects  from  the  canal  is  its  effect  upon  transconti- 


10 

nental  rates.  It  virtually  makes  our  east  and  west  coasts  contiguous. 
It  gives  us  water  transportation  to  regulate  our  railroad  rates.  The 
history  of  the  Panama  route  for  the  last  half  century  furnishes  a  fair 
indication  of  the  danger  which  we  have  to  fear.  In  spite  of  its  many 
advantages,  the  present  Panama  railroad  route  has  never  been  an 
effective  competitor  of  our  great  transcontinental  railroads.  The 
public  have  never  received  any  real  benefit  from  its  competition. 
The  matter  has  been  investigated  congressionally,  and  the  history  of 
the  way  in  which  the  railroads  have  throttled  this  possible  com- 
petitor is  a  matter  of  record.  In  early  days  the  Panama  Railroad 
Co.  was  frankly  paid  $75,000  a  month,  with  the  object  of  suppressing 
its  traffic.  In  later  days,  through  other  and  more  indirect  arrange- 
ments, transisthmian  business  has  been  discouraged  and  kept  down 
and  the  rates  over  the  Isthmus  have  been  kept  up,  with  the  result  that 
at  the  present  day  it  is  said  that  not  less  than  90  per  cent  of  our  trade 
between  our  east  and  west  coasts  is  carried  by  our  transcontinental 
railroads. 

One  thing  is  perfectly  clear — we  must  be  more  successful  in  the 
future  than  we  have  been  in  the  past.  The  country  has  not  put  its 
money  into  the  canal  merely  in  order  to  allow  this  new  l•o\^te  to  be 
throttled  as  the  old  one  was.  And  the  public  temper  will  see  that 
this  is  prevented.  If  the  influences  which  have  united  against  the 
old  route  are  unwise  enough  to  attempt  to  stifle  the  competition  of 
the  new,  means  more  and  more  drastic  will  undoubtedly  be  resorted 
to  in  order  to  frustrate  such  an  attempt.  I  say  "  unwise  "  because 
the  history  of  the  world  is  full  of  such  attempts  and  furnishes  con- 
clusive proof  of  their  shortsightedness.  I  believe  that  the  opening  of 
the  canal  instead  of  being  a  loss  will  ultimately  be  a  benefit  to  the 
railroads  themselves  in  the  new  local  trade  which  it  will  encourage 
and  develop.  That  has  been  the  history  of  the  opening  of  practically 
every  new  trade  route  or  improved  method  of  transportation. 

It  has  already  been  suggested,  as  a  means  of  keeping  the  canal  free 
from  railroad  control,  that  we  establish  a  Government-owned  line 
of  steamers  through  the  Panama  Canal.  But  this  method  would 
be  such  a  radical  departure  from  the  policy  on  which  our  na- 
tional transportation  systems  have  been  hitherto  developed  that  I 
think  it  may  well  be  kept  in  the  background  until  other  more 
usual  methods  have  been  attempted  and  found  wanting.  I  believe 
that  there  is  abundant  opportunity  for  the  employment  of  private 
capital  in  the  development  of  our  transisthmian  traffic,  and  that 
it  should  be  the  policy  of  the  Nation  to  encourage  the  development 
by  independent  capital  of  as  many  lines  and  as  much  commerce 
through  the  canal  as  possible. 

I  am  inclined  to  believe  that  the  most  effective  solution  of  the 
problem  will  be  to  extend  over  this  new  transisthmian  route  the 


11 

power  of  the  Interstate  Commerce  Commission,  including  its  regu- 
lative power  over  rates.  Such  a  method  would  permit  the  develop- 
ment of  this  new  form  of  interstate  commerce  along  the  same  his- 
torical lines  as  those  which  we  have  followed  successfully  in  our  in- 
terstate commerce  development  hitherto.  I  pereonally  believe  it 
would  be  more  effective  in  keeping  down  water  rates  than  a  negative 
prohibition  against  railroad  ownership  or  control,  although  the  nega- 
tive prohibition  is  strongly  urged  by  many  persons  thoroughly 
familiar  with  the  situation.  Both  methods  could  be  tried  at  the 
same  time  if  desired. 

To  sum  up,  our  legislation  on  canal  tolls  should,  in  my  opinion,  au- 
thorize the  President,  through  such  administrative  process  as  he  may 
establish  for  the  purpose,  to  fix  these  tolls  and  change  and  readjust 
them  to  meet  the  lessons  of  experience.  If  Congress  shall  decide  upon 
the  policy  of  encouraging  American  shipping  by  a  subsidy  of  canal 
tolls,  it  should  authorize  the  President  to  apply  that  policy  to  such 
extent  and  in  such  manner  as  will  best  subserve  the  purpose  intended. 
I  personally  hope  that  Congress  will  so  decide.  I  believe  that  this 
Nation  should  put  itself  in  a  position  of  readiness  to  wisely  assist 
its  merchantile  marine  in  this  respect.  Experience  may  show  the 
assistance  to  be  more  necessary  as  to  some  classes  of  shipping  than 
as  to  others.  Experience  may  show,  for  example,  that  our  coast- 
wise lines  can  meet  their  railroad  competition  without  this  additional 
aid.  To  give  it  under  such  circumstances  would  not  lower  rates; 
it  would  simply  add  to  the  profits  of  the  shipowner.  But  such  legis- 
lation as  is  enacted  should  be  enacted  promptly  and  with  due  regard 
to  all  the  elements  of  the  problem  to  be  met. 

The  completion  of  the  Panama  Canal  will  practically  coincide  with 
one  of  the  turning  points  of  our  national  life.  Hitherto  we  have  been 
absorbed  in  the  domestic  problems  of  a  young  Nation.  We  have 
barely  finished  the  conquest  of  our  own  unoccupied  land.  Now  that 
that  land  is  gone  we  are  necessarily  turning  to  foreign  markets  as 
a  field  of  activity.  With  each  advancing  decade  our  manufactures 
and  our  foreign  trade  will  become  more  vitally  important.  Each 
decade  will  see  our  citizens  turning  their  eyes  toward  the  ocean — 
toward  that  commercial  future  which  lies  over  seas.  The  reestablish- 
ment  of  our  national  merchant  marine  is  a  necessity  which  will  be- 
come clearer  with  every  year  that  passes.  Let  us  take  our  -first  steps 
upon  the  right  lines  for  future  growth.  Let  us  prepare  for  the 
fullest  utilization  of  this  great  canal  which  we  have  built  by  a 
wise  and  far-sighted  treatment  of  its  problems,  which  will  tend  at 
the  same  time  toward  the  establishment  of  that  national  commerce 
which  can  alone  bring  us  any  benefit  from  the  canal.  The  problems 
far  transcend  party  lines.  It  is  a  national  problem  demanding 
national  treatment. 

o 


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